Microsoft to Buy Out Dell?

Posted by michaels| Tue, Jan 22, 2013 - 4:24 PM

Troubled computer maker Dell has been looking to go private, according to rumors that we reported a few days ago. Now it looks like Microsoft is interested in buying out Dell and is currently in talks, according to a person familiar with the deal discussions. There’s no commitment yet from Microsoft, but it looks like Microsoft would be looking to spend around $2b on the deal.

Also, Dell’s founder and CEO, Michael Dell, has been in negotiations with private equity firm Silver Lake Partners that would see the company buy out all their shareholders, returning the company to private ownership, with the share price discussed being around $13 to $14. Both Microsoft and Dell declined to comment on these negotiations. It’s not yet clear what Microsoft’s interest is in Dell, since neither company is talking. However, these talks are clearly good for Dell since their share price rose 2.6% to $13.18 in late afternoon trading on Tuesday.

Looking at the overall situation, it looks like the obvious interest for Microsoft would be to have a ready-made manufacturing capability for a whole range of Microsoft branded computer hardware such as desktops, laptops and more, including the Surface tablet which they already have a hardware manufacturer make for them. This would give them an Apple-style vertically integrated market, completely controlled by Microsoft, with all the user restrictions and high prices that entails.

A Dell buyout, if completed, would be among the biggest leveraged buyouts since before the 2008 financial crisis, when a collapse of credit cut off the spigot for large multi-firm deals that took companies private.

Once the world’s largest PC maker, Dell has struggled to adapt to a retail-centric market focused more on consumers who viewed the devices as commodities. In the quarter ended Nov. 2, Dell’s revenue from PCs declined 19% compared with a year ago. Overall, Dell’s profit declined 47%.